This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Has Baker Hughes Finally Turned the Corner?

NEW YORK ( TheStreet) -- Shares of oil services company Baker Hughes (BHI - Get Report) have seen a slight uptick ever since the company's first-quarter earnings announcement.

While there are still concerns about the overall health of the oil industry -- which has been marred by slumping prices and weak rig counts -- analysts at Credit Suisse think Baker Hughes has turned the corner following years of reorganization. But is the stock worth $54 per share, which suggests a 25% premium from current levels? Credit Suisse believes it does.

From the numbers that I've seen from rivals Halliburton (HAL) and Schlumberger (SLB) the results have been mostly positive. Given what their management teams have stated, investors should expect a rebound for the sector.

However, the cynic in me won't forget that the same level of optimism was also proclaimed for 2012. Instead, things got worse. To date, the industry has suffered five consecutive quarters of falling rig counts. I suppose Credit Suisse feels that this quarter reflected a bottom in the decline. In many respects, there was some evidence to support this theory. But I still want to be cautiously optimistic here.

The better approach on Baker Hughes would be to wait and see. That's not a slight. While Baker Hughes looks meaningfully improved, the company still lacks the punching power of Schlumberger and Halliburton. I don't think the first-quarter report, which included a 2% decline in revenue, did enough to merit higher optimism -- not when Schlumberger posted 8% year-over-year revenue growth.

For that matter, even though Halliburton didn't excite the Street, the company still posted a modest year-over-year increase. So what exactly is Credit Suisse seeing in BHI that I'm not? My guess is it is looking at the fact that of the three, Baker Hughes was the only one to post sequential growth, albeit by less than 1%, which supports the "bottom" theory.

In other words, Baker Hughes can't get any worse from here. Still, does it deserve 13% increase in the share price, especially when net income declined 30% year over year? This is where Baker Hughes can benefit from better diversification as North American weakness really took a toll on the company's performance. Granted, the company is working hard to build its international market position. But with North America being such an overhang, I'll feel much better to see those efforts accelerated.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
BHI $68.09 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%
TSLA $218.42 0.00%


DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs